We have all seen the commercials on television and heard the ads on the radio promising to consolidate your debt and/or settle it with your debtors for less than you owe. For many people dealing with unmanageable and ever-increasing bills, these companies seem to offer the hope of being debt-free someday soon. However, especially during these difficult economic times with high unemployment rates, these companies are simply preying on vulnerable consumers.
New York Attorney General Andrew Cuomo filed suit against two such companies on May 19th, 2009. Cuomo stated, “these companies claim to be the light at the end of the tunnel, but time after time they have shown that they only add to the burdens of Americans dealing with debt.” The main problem is the exorbitant fees charged by the company prior to any settlement of the debt: sometimes as much as 15% of the total debt. Additionally, after failing to follow through with debt settlements in the majority of their clients’ cases, the clients’ credit score is ruined and they end up owing more than they did previously.
One company targeted in the NY suit, Credit Solutions, enrolled 18,000 customers in New York State in the last five years, earned $17 million in fees, and only settled the debts of fewer than 2,000 of those customers.
The other company, Nationwide Asset Services, enrolled nearly 2000 customers in NY in the last three years, and settled the debts of only 64 customers. Even more shocking is that of the 64 settled cases, 24 of those customers ended up paying more than originally owed.
But these allegations of fraudulent and deceptive business practices and false advertising are not the first of their kind. Credit Solutions was sued earlier this year by the Texas attorney general for the same deceptive business practices, and furthermore, had to refund: $700,000 to customers in South Carolina in 2007 after the state accused it of violating local credit counseling laws; and $588,000 to Idaho customers in 2008 for operating in the state without a license.
If you feel that you have fallen prey to the deceptive and unfair business practices of these or other debt settlement companies, please contact us immediately for a free consultation. Pogust Braslow & Millrood LLC will fight to protect your rights and those of all consumers being exploited by predatory companies like these.